Richard Brandt responded to my challenge by explaining in some detail why he thinks Microsoft will never catch up with Google. His argument basically boils down to a very well-reasoned “Why would they? The reasons why Microsoft succeeded in overtaking almost all other PC software vendors don’t apply in this case.” And clearly Google has enormous resources to throw at businesses like search, plus a corporate culture that seems from the outside to be a lot more productive than Microsoft’s these days.

But on the other hand – what exactly is Google’s sustainable advantage?

Are Google’s search results still better than Microsoft’s? Probably not by much, and probably not in a sustainable way. It takes a lot of money and a lot of searches (because you need to be able to examine the search logs) to compete with Google in search quality, but Microsoft has an ample supply of both.

Does Google have significant customer lock-in? I don’t see a lot of lock-in for search, whether on the user or advertiser side. Gmail is Google’s only other important, successful product to date. And while it may have achieved some lock-in, a web-based email system that truly integrated well with Outlook would eclipse it instantly.

And so, while Richard makes a persuasive case that we can’t just assume Microsoft will catch up, it’s not at all clear to me either why we should just assume that Google can stay ahead.

Comments

First lets establish that in the very long term no advantage is sustainable in any absolute sense. That said, google’s main advantage in the search business is its ability to deploy enormous amount of computing power at low cost ( relative to industry) using its homespun set of technologies. This article describes it well ( http://www.baselinemag.com/print_article2/0,1217,a=182560,00.asp).
Being the lowest cost provider of computational infrastructure for mass usage makes it easy for it to maintain leadership in search which demands exactly this. However, in the future, it also enables it to go into any other areas where huge amounts of data storage, processing and analysis are required ( video is an obvious here). Sure, other companies can do this by throwing money at the problem – but can they do it at the low cost that google can ? Till there is some ground breaking technical breakthrough that makes Google’s model of distributed computing at a mass scale deployed on inexpensive hardware obselete, I think this is as sustainable an advatange as any other.

Curt Monash on
July 25th, 2006 12:51 am

Good point, Piyush. And that’s a GREAT article; I linked to it some time ago over on http://www.texttechnologies.com, which is where I usually write about search stuff.

But Richard seemed to be focusing on Google apps like their Office competitors, and in areas where low-cost server farms don’t seem as relevant.

Curt,
I think the rollout of office type applications on a massive scale does depend upon the ability to manage the associated cost and complexity . That is by no means an easy problem to solve and I think Google with its expertise in managing low cost infrastructure on which it can run complicated parallel computing processes has a significant advantage there.

Bottom line – if today both Microsoft and Google set out to create a totally web based equivalent of an office app from scratch, they would probably both do an equally good job on software. However, when it comes to delivering a highly performant version of this over the web on a massive scale google will win hands down as it is ‘core’ to them in a way that it isn’t to Microsoft. it is about a lot more than just low cost web server farms – they have developed optimised file systems, a parallel computing architecture, systems administration utilities and automated management software which , due to their proprietary nature, are not available to the outside world to replicate. This to me is a much harder problem a competitor would have to face. With the latest comment on their earnings call that the rate of capex will outstrip revenue growth in the future, there is every sign that Google is well aware of just where its core differentiators lie and isn’t resting on its laurels.

I would agree that a long term advantage based on software writing skills alone is not necessarily sustainable, but combine that with significant proprietary assets in low cost deployment, parallel computing and management of very large amounts of infrastructure, and I think there is a significant moat there.

I agree with the comments above. Google’s infrastructure is extraordinary, and that will be an advantage in running online apps.

A couple years ago at the Stanford Entrepreneurialism conference, I heard Eric Schmidt advise that entrepreneurs find some way to lock in customers. I asked him why, since Google didn’t have any lock in. He said to wait and see.

I believe that Google gets a network effect from its advertising network. It’s the default place to advertise. It doesn’t cost anything up front to use other ad networks as well, but Google will continue to be the first choice, and not everybody will seek out multiple advertising networks.

Google’s other apps have not caught on yet, but I would give them time. It took Microsoft a while to build up its apps business. And Microsoft’s OS has less leverage on internet-based apps. Google also seems to be working on its own OS, and I expect to see it release a Google-branded PC someday, inexpensive and efficient and designed to connect you to Google apps.

Admittedly, these are not as strong lock-ins as Microsoft enjoyed. But that’s not necessarily a bad thing. It forces the company to keep innovating. Microsoft got lazy. I’m not sure Microsoft will have any big advantage to lock in customers over Google, either. That makes it a race to stay ahead in development, and Google still has a good lead.

Chris on
September 25th, 2006 8:52 am

Isn’t this just the thin-client/thick-client argument all over again. Microsoft are traditional experts in the thick-client arena. Google are specialists in thin-client systems. At present, we are using a mix of both. We like thick-client office apps like MS Office/open office, but we like thin-client media/search apps.
If google can get everyone into the thin-client model for all computing, they will win. Clearly they realise this – hence the google office apps. Microsoft have a fundamental problem – you cannot easily make thick-client versions of meda/search apps. They’ve done well – there is a lot of functionality in IE which is getting close to thick-client browsing. They have desktop search, tick-client email (outlook) etc. Their battle is to get people to prefer thick-client approaches, and if customers are moving around, this is difficult – if I walk into an internet cafe/my home study/my office/my uni computer lab etc, I want to be able to access my mail, news subscriptions, docs etc using my preferred interfaces. To make this work with thick client, every PC needs to have the same (MS?) software on it, and I need to be able to apply my identity to the computer (eg from a memory stick, or a remote storage login) to access all my stuff. The barrier here of gettng every PC to run MS software is the problem MS have. The thick client model only works if everyone has all the MS software, and this can be prevented by cost. If MS remove the cost barrier they lose their revenue stream. Google have another revvenue stream (adverts) so they can afford to make their apps free, or offer a non-advert fee scheme.
Another advantage google have is softwaer updates. A thin-client scheme rarely requires a client update, so they don’t have to manage a patch cycle, user integration issues etc.
I suspect that in 10 years time, we’ll use thin-client approaches for everything except:
– apps requiring high performance (games/software development/CAD etc)
– stuff we want to keep private